ORGANIZING COST AND RESULT ACCOUNTING USING THE DIRECT COSTING SYSTEM

Аннотация

This article examines direct costs and variable indirect expenses involved in calculating product cost, as well as key issues in improvingcost accounting inenterprises. Keywords:cost, accounting, International Financial Reporting Standards (IFRS), financial stability, direct costing, goods soldduring thereporting period. Direct Costing is a cost accounting system based ondividing a company's total costs into fixed costs (which do not depend on the amount of production per unit of time) and variable costs, which change in direct proportion to the quantity of products produced. Only the latter group—direct costs and variable indirect expenses—are included in the cost calculation of products. This applies both to the valuation of semi-finished and finished goods when preparing the final annual balance sheet and to the assessment of costs related to goods sold during the reporting period. In direct costing, fixed costs are recorded in theprofit and loss account. Theintroduction ofdirect costinghas solved two key problems: 1. Eliminating the effect of production volume changes on the unit cost of manufactured products. 2. Determining the product selection for production based on the portion of fixed costs it covers ratherthan thedifference between price and fullcost. The direct costing technique is adapted to specific economic conditions, such as slowing economic growth and underutilization of production factors. In such situations, enterprise managers focus more on controlling variable costs than fixed ones since fixed costs remain at a relatively low and stable level and increase only with production expansion. The growth period of fixed costs is longer than economic upturns, making variable cost analysis more relevant during economiccrises. To address such problems, simple direct costing is used, based only on operating (overhead) costs. In this system, only variable costs are allocated to finished products, while fixed costs are entirely charged to the results of the reporting period in which they occurred. The company's total revenue from product sales is reduced by variable production and sales costs, yielding an intermediateresult known as thecontribution margin. Using contribution margin allows for the expansion of traditional management decision- making tools. Simple direct costing serves as the initial and classical form of the system, where fixed costs are accounted for as a single, undivided block. In a single-step cost accounting system, all fixed costs combined in one block are deducted from the total contribution margin of thereporting period. Principlesof SimpleDirectCosting:  Costsare classified into fixed and variable based onproduction volume.  The cost of manufactured and sold products is calculated only based on variable (operating) costs. page198 INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE ISSN:2692-5206,ImpactFactor:12,23 AmericanAcademicpublishers,volume05,issue02,2025 Journal: https://www.academicpublishers.org/journals/index.php/ijai  The difference between variable cost and selling price is compared, known as the variablecost margin.  Fixed costs are covered by various contribution margins to determine the financial performance andprofitability ofenterprises. Simple direct costing is suitable for enterprises with low production volumes and a limited rangeof products. AdvancedDirect Costing: Advanced direct costing retains all the advantages of simple direct costing while addressing its limitations by considering the specific nature of fixed costs linked to certain products. In multi- step fixed cost allocation, instead of distributing fixed costs among individual cost carriers, they areallocated across a general product category, cost centers, orbusiness divisions. In modern management accounting, fixedcosts are categorized as follows: 1. Fixed product costs – directly related to the total volume of a specific product produced over a given period (e.g., development costs or maintenance costs for specialized equipment). 2. Fixed product group costs – incurred for multiple similar products within the same group but not allocated to individual items (e.g., capital costs for machinery used in producing agroup ofproducts orresearch costs forproduct group development). 3. Fixed cost center expenses – not allocated among individual product groups but directly assigned to cost centers. 4. Fixed divisional expenses – arise due to the existence of multiple cost centers within a division or the division itself and are covered by the total contribution margin of all products produced bythat division. 5. Enterprise-wide fixed expenses – costs that cannot be assigned to specific cost objects, such as general corporate management expenses. Advanced direct costing differentiates not only variable but also fixed costs, determining contributionmargins byproduct type, production location, and sales region. Key Features ofAdvanced Direct Costing:  Introduction of specific direct fixed costs to r